## Facts

- Dryer Electric, Inc. (Dryer) granted F.W. Financial Services, Inc. (FWFS) a security interest in Dryer’s accounts receivable as collateral for a loan, and FWFS perfected its interest.
- The security agreement gave FWFS the option to accelerate the loan upon default and stated that postponing acceleration would not waive FWFS’s ability to accelerate later.
- Dryer defaulted on the loan.
- Believing Dryer could eventually pay, FWFS did not immediately accelerate the loan or foreclose after the default.
- About a year later, Clif Davis obtained a money judgment against Dryer in an unrelated matter.
- Davis attempted to collect on the judgment by garnishing Dryer’s accounts receivable and received money through the garnishment process.
- Dryer’s financial condition worsened, and the next year FWFS foreclosed on its collateral.
- FWFS learned of Davis’s garnishment and demanded that Davis turn over the sums he had taken from the receivables.
- Davis refused and sought a declaratory judgment that his judgment lien and garnishment had priority over FWFS’s security interest under Oregon’s UCC.
- The trial court granted summary judgment to FWFS, ruling FWFS’s interest was superior and holding Davis liable for conversion.
- Davis appealed.

## Issues

1. Did FWFS lose or waive priority in its previously perfected security interest in Dryer’s accounts receivable by choosing not to accelerate or foreclose immediately after Dryer’s default?
2. Under Oregon’s UCC priority rules, did Davis’s later-acquired judgment lien and garnishment of the receivables take priority over FWFS’s earlier perfected security interest?
3. Did Davis commit conversion by keeping the garnished funds after FWFS asserted its superior right to the receivables and demanded turnover?

## Decision

- The appellate court affirmed summary judgment for FWFS.
- The court held FWFS did not waive or surrender its rights in the receivables by deferring acceleration and enforcement after default, particularly in light of the agreement’s nonwaiver language.
- The court held FWFS’s perfected security interest in the accounts receivable (and amounts collected from them) had priority over Davis’s later judgment lien and garnishment.
- The court affirmed the conversion ruling against Davis based on his refusal to surrender funds subject to FWFS’s superior claim.

## Legal Principles

- A security interest that is properly perfected under Article 9 generally has priority over a later judgment lien creditor’s rights in the same collateral.
- A judgment creditor who garnishes a debtor’s property obtains only the debtor’s interest in that property and takes subject to prior perfected security interests.
- A secured party’s decision to delay acceleration or other enforcement following a default, without more, does not amount to waiver of the secured party’s rights; waiver requires conduct showing an intentional relinquishment of a known right, and nonwaiver clauses in the parties’ agreement may confirm that intent is lacking.
- A perfected security interest in accounts receivable attaches to identifiable proceeds of the collateral, including money collected on the accounts.
- Conversion may be established when a party exercises dominion or control over property in a manner inconsistent with another’s superior right to possession; retaining funds after notice and demand can satisfy that standard.

## Conclusion

The court affirmed summary judgment for FWFS, holding that FWFS’s earlier perfected security interest in Dryer’s accounts receivable remained superior despite FWFS’s decision to postpone acceleration and foreclosure after default, that Davis’s later judgment lien and garnishment did not take priority over FWFS under the UCC, and that Davis’s retention of the garnished funds in the face of FWFS’s demand supported liability for conversion.


Davis v. F.W. Financial Services, Inc., 317 P.3d 916 (2013)